Stanbic increases headline earnings by 24%

• Headline earnings 24% up
• Headline earnings per share 21% higher
• Cost-to-income ratio improved to 57.8%
• Return on equity 21%
• Interim dividend per share 27% higher

Standard Bank Investment Corporation (Stanbic) achieved good results for the half-year to 30 June 2001. Headline earnings increased by 24%, to R2 020 million, and headline earnings per share grew by 21%, to 154 cents.

Total income of R7 164 million, after credit loss provisions, was 13% higher. Net interest income before credit provisions was 12% up. The interest margin for the period of 3.5% compares with 3.7% previously.

Non-interest income, which now comprises 51% of total income, was 14% higher. Fees and commissions were 15% up. Trading income was 13% higher, with good growth from foreign exchange and interest rate products and from customer businesses within international fixed income capital markets.

Credit loss provisions of R747 million were 13% up and, as a percentage of loans and advances, declined to 1.13% from 1.17% for the 2000 year. International and African operations, while comprising a small part of the overall provision, experienced a substantial provisioning increase.

Provisions for domestic operations were only 4% higher. Non-performing loans, as a percentage of average loans, reduced to 4.0% from 4.4% in December 2000 and 5.0% in June 2000. The quality of the loan book has continued to improve, as evidenced by the decline in the level of arrears across all loan categories.

Operating expenses for the period were 7% higher, with staff and other costs up 6% and 9% respectively. The cost-to-income ratio improved to 57.8% from 60.9% for the comparable period and 59.0% for the 2000 year.

Domestic and African banking operations achieved good profit growth during the period. International operations although affected by the downturn in world markets, did well to maintain moderate growth in their level of earnings contribution.

Says Stanbic Chief Executive, Jacko Maree: “In tandem with developments overseas, momentum in the domestic market slowed over the period, with forecasts of economic growth continually reduced. Demand for retail credit has shown only modest improvement, as consumers are still reluctant to incur additional debt in an uncertain economic and business environment. Certain sectors, such as home loans, have shown better growth and this selective improvement is expected to continue and broaden moderately over the remainder of the year.”

Headline earnings from banking operations of R1 800 million were 26% up on the comparable period. The impetus for this performance was good growth in net interest and non-interest income and tight control over expenses, which more than offset the effects of the relatively slow growth in loans and advances and the small decline in interest margin.

Liberty Group performed well over the period. Net income of R220 million has been included in Stanbic’s headline earnings for the period, 8% higher than unadjusted earning for the comparable period and 16% up on earnings adjusted for the effects of the R3.5 billion distribution to shareholders in April 2001.

Total assets of R309.7 billion were 18% higher than at June 2000, with banking assets 20% up.

Total capital and reserves were 24% up, due mainly to the level of earnings as well as capitalisation awards to shareholders in lieu of cash dividends.

Loans and advances were 15% higher, with domestic growth restricted to 7% for the period.

The group remains well capitalised, with total regulatory capital at 13.8% of risk-weighted assets and tier one capital at 11.1%. The regulatory minimum capital requirement will be raised to 10% from October 2001.

An interim dividend of 28 cents per share (2000: 22 cents) has been declared, in accordance with the group’s policy of declaring approximately one third of the previous year’s total dividend per share at the half year.

Says Maree: “Trading forecasts in the major markets of the world have been progressively downgraded over the course of the year to date and an end to this trend is not yet in sight. This is likely to affect trading results over the remaining months of the year, particularly in those of the group’s operations that are more exposed to world markets. Similar growth in earnings to that achieved in the first half is achievable in the second half of the year, but this could be adversely impacted by further negative developments in international markets.”